Recent Affordable Care Act (ACA) Changes and Impacts February 21, 2014 10:02 am by Srinivas Attili

Over the past three months, the executive branch issued several directives driving changes to the Affordable Care Act (ACA). The following discussion gives the background/context, the change and the potential impacts to consumers and insurers for some key ACA changes.

The Change on November 14th 2013

Background/context -

• Before the ACA, individual policies had higher prices than most group plans, fewer benefits and protections for members when they get sick

• The ACA tried to address this problem by directing Americans who rely on individual policies to buy coverage through the new insurance marketplaces

• The ACA defines the minimum set of standards for health policies; therefore requiring insurance companies to cancel certain non compliant policies

• President Obama’s promise ‘if you like your plan, you can keep it” fell short – Insurers cancelled non compliant policies for individuals, leaving them to shop on the new exchange marketplace for coverage

The Change on 11/14 -

• On 11/14 President Obama issued a new directive — health insurance issuers may choose to continue coverage that would otherwise be terminated or canceled, and affected individuals and small businesses may choose to re-enroll

• White House is allowing each state to determine whether its residents may keep non-compliant health plans. Some states have already announced they won’t allow insurers to extend old policies that are not compliance under the ACA

• House passed the bill “Keep Your Health Plan Act” on 11/15 that would not only let people keep their existing policies for a year but also let insurers sell those existing (non ACA conforming) plans to new customers

• Affects ~10 million people who already have individual policies

People who now have cheaper insurance — because their plans have fewer benefits — may still choose to keep them, rather than buying the new policies. Generally, those people are thought to be younger and healthier

Potential Impacts -

• Comparable plan on the exchange comes with a higher premium, higher deductible and higher out-of-pocket cost but with essential benefits defined by ACA (more coverage)

• Implementation of change by health insurers will require refiling and selling of products that were discontinued and significant unplanned internal effort

• As insurers sell or renew these policies, they must tell policyholders about changes in the options available to them. They also need tell the members how to obtain marketplace coverage and that they can get non-marketplace coverage that also meets the law’s new benefit requirements.

• Might threaten the viability of insurance exchange markets – Less enrollment from exchanges varied by markets (impacting Payer pricing models for exchanges) as healthier individuals will opt to stay on old plans and only the sickest patients will buy insurance from the new marketplace – a negative effect on the risk profile of the exchange pool

• This will be on top of the low enrollments on exchanges due to healthcare.gov website issues. The rules have changed so much that low enrollment may not be a bad thing for some insurers — a manageable number even if the plans lose money

• 2014 premiums were set on the assumption that owners of the canceled policies would move onto the exchanges; This change could distort the planned risk pool and result in 2015 higher premiums and fewer choices

Even if the mix of customers changes as a result of the new rules, insurers cannot change their prices for 2014, because the rates already have been set by each state’s insurance regulators

The Change on December 19th 2013

Background/context -

• Cheaper Catastrophic Plans with limited benefits and high deductibles, were mainly reserved for customers under age 30 or those who could not find ACA plans that cost less than eight percent of their income

The Change on 12/19 -

• On 12/19 President Obama issued a new directive — people with canceled policies will not be subject to the individual mandate in 2014

• People with canceled policies will be qualified for the ACA’s “hardship exemption” and will be allowed to purchase catastrophic insurance through exchanges

• According to Department of Health and Human Services—about 500,000 whose old plans were canceled but hadn’t yet obtained new coverage—are expected to take advantage of the new provision

Potential Impacts -

• Allowing more consumers to buy the catastrophic plans could steer key healthy customers away from costlier policies, which could be left with a bigger share of sicker customers who need the rich benefits

• Impacts Payer pricing models for exchanges as healthier individuals will opt to buy cheaper catastrophic plans and skewing risk mix for products on the exchange

The Change on February 11th 2014

Background/context -

• The statutory mandate requires businesses with the equivalent of 50 full-time employees based on a 30-hour work week to cover all workers or else pay a fine, starting Jan. 1, 2014

The Change on 2/11 -

• Employer mandate delayed to 2016 resulting in a second delay of employer mandate- Last summer the deadline was pushed to 2015

• New 70% mandate – Deadline is pushed to 2016 for employers with fewer than 100 workers – a new business category. Employers with more than 100 workers will have to cover 70% of their work force in 2015, 95% in 2016 and after

Potential Impacts -

• Delays create less job-based coverage and therefore more people towards the exchange marketplace if they want insurance.

• More people are now eligible for subsidies on the exchanges (people are supposed to be eligible for subsidies only if their employers don’t offer insurance), driving up exchange enrollment

• Creates additional uncertainty in the industry – Small group market becomes more challenging for insurers as they begun developing and selling small group compliant policies to employers.

• Small group employers are no longer required to meet the requirements of the ACA for 2015, existing plans may need to be resurrected for another year

There are going to be several twists and turns over the next few months. It is going to be very interesting to watch the changes and assess the impacts on the industry.

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About Srinivas Attili Srini Attili is a Partner at IBM with over 14 years of extensive experience in developing and executing on strategic growth plans, building trusted relationships, project and portfolio management, and delivery of complex IT Services including Systems Integration, Information Management, Business Intelligence, and Analytics programs in federal and healthcare industries. Srini has two patents in the area of Information Management and Analytics. He holds an MBA from Univ. of MD College Park, MS in Computer Science from NJ Institute of Technology and a BS in Computer Engineering from Nagpur University, India. He is PMI Certified PMP, Professional, Academy of Healthcare Management (PAHM), IBM Certified Senior Project Manager and an IBM certified Technology Consultant Specializing in Technology Integration. View all posts by Srinivas Attili →